Freight Transportation Services

GST/HST memorandum 28-2
August 2017

This version replaces the one dated January 1999.

All legislative references in this publication are to the Excise Tax Act (the Act) unless otherwise specified. The information in this publication does not replace the law found in the Act and its regulations.

If this information does not completely address your particular situation, you may wish to refer to the Act or relevant regulation, or call GST/HST Rulings at 1-800-959-8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, explains how to obtain a ruling or an interpretation and lists the GST/HST rulings centres.

If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1-800-567-4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.

For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1-855-666-5166.

GST/HST rates

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, see GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province.

Table of Contents

• General
• Terms and definitions
• Types of freight transportation services
  • Reload centres
  • Shunting services
  • Stevedoring
  • Towing services
• Property or services that may be part of, or incidental to, a freight transportation service
  • Packing services
  • Deadheading and empty mile charges
  • Pilot car services
  • Driving services
• Place of supply – in or outside Canada
  • Supply by a non-resident
• Zero-rated supplies of freight transportation services
  • Interlining
  • International freight transportation services
  • Outbound freight movement
  • Inbound freight movement
• Supplies to international carriers
• Place of supply – in a participating or non-participating province
  • Separate supplies of freight services in Canada
  • Postage and mail delivery services
• Special issues
  • Freight forwarders’ services
  • Supplies by agents to non-residents
  • Sufferance warehouses
  • Loss or damage
  • Rolling stock penalties and demurrage
• Appendix

General

1. A supply, including a supply of a freight transportation service, that is made in Canada is subject to the GST at the rate of 5% or subject to the HST at the applicable harmonized rate, unless it is zero-rated (taxable at 0%) or exempt.

2. Generally, international freight transportation services are zero-rated. Domestic freight transportation services are generally subject to the GST at a rate of 5%, or the HST at the applicable harmonized rate if made in a participating province, but may qualify for zero-rating in certain circumstances if they are part of an international freight movement. Generally, this publication explains how to determine whether a supply of a freight transportation service is made in Canada, whether it then qualifies for zero-rated or exempt status and, if not, the rate of tax that applies to the supply based on the province in which the supply is made.

Terms and definitions

3. Subsection 123(1) defines “carrier” to mean a person who supplies a freight transportation service within the meaning of freight transportation service assigned by subsection 1(1) of Part VII of Schedule VI to the Act.

4. A person is not required to perform a freight transportation service in order to be considered a carrier; the person need only assume liability as a supplier of a freight transportation service.

5. The term “consignee” is not defined in the Act but generally means the person to whom a consignment is made. It is normally the person named on the bill of lading to whom or to whose order the bill promises delivery. In commercial use, consignee means a person to whom a consignment may be made, a person to whom goods are shipped for sale, a person to whom a carrier may lawfully make delivery in accordance with the contract of carriage, or a person to whom goods are consigned, shipped or otherwise transmitted.

6. Under subsection 1(1) of Part VII of Schedule VI, a “continuous freight movement” means the transportation of tangible personal property by one or more carriers to a destination specified by the shipper of the property, where all freight transportation services supplied by the carriers are supplied as a consequence of instructions given by the shipper of the property.

7. The term continuous freight movement is relevant for the tax treatment of interline settlements as well as the zero-rating provision for the domestic portion of inbound international freight movements.

Although the definition of “continuous freight movement” can include a freight movement by one carrier or a situation where one carrier fully subcontracts a freight movement to another carrier, in practice the term generally refers to a situation where two or more carriers are contracted to move goods to the destination specified by the shipper or consignee (interlining). Refer to paragraphs 44 to 61 of this memorandum for more information on interlining.

8. Under subsection 1(1) of Part VII of Schedule VI, a “continuous outbound freight movement” means the transportation of tangible personal property by one or more carriers from a place in Canada

• to a place outside Canada, or
• to another place in Canada from which the property is to be exported,

if, after the shipper of the property transfers possession of the property to a carrier and before the property is exported, it is not (except to the extent reasonably necessary or incidental to its transportation) further processed, transformed, or altered in Canada, other than, in the case of natural gas being transported by pipeline, to recover natural gas liquids or ethane from the gas at a straddle plant.

9. The term “conveyance” is not defined in the Act but is understood to mean a vehicle for transporting or carrying, such as a bus, ship, airplane, truck, train, or automobile.

10. Subsection 123(1) defines “courier” to have the meaning assigned by subsection 2(1) of the Customs Act. Under that Act, “courier” means a commercial carrier that is engaged in scheduled international transportation of shipments of goods other than goods imported as mail.

11. Destination is relevant to the zero-rating and place of supply rules for freight transportation services.

12. For the purpose of the zero-rating provisions, subsection 1(1) of Part VII of Schedule VI defines “destination” to mean, in respect of a continuous freight movement of property, a place specified by the shipper of the property where possession of the property is transferred to the person to whom the property is consigned or addressed by the shipper.

13. For the purpose of the place of supply provisions, section 1 of Part VI of Schedule IX defines “destination” of a freight transportation service to mean the place specified by the shipper of the property where possession of the property is transferred to the person to whom the property is consigned or addressed by the shipper.

14. Subsection 123(1) defines “export” to mean export from Canada.

15. Subsection 1(1) of Part VII of Schedule VI and section 1 of Part VI of Schedule IX defines “freight transportation service” to mean a particular service of transporting tangible personal property and, for greater certainty, includes

• a service of delivering mail, and
• any other property or service supplied to the recipient of the particular service by the person who supplies the particular service, where the other property or service is part of or incidental to the particular service, whether there is a separate charge for the other property or service,

but does not include a service provided by the supplier of a passenger transportation service of transporting an individual’s baggage in connection with the passenger transportation service.

16. Subsection 1(1) of Part VII of Schedule VI defines “origin” to mean, in respect of a continuous freight movement, the place where the first carrier that is engaged in the continuous freight movement takes possession of the property being transported.

17. Subsection 1(1) of Part VII of Schedule VI defines “place outside Canada”, in respect of a freight transportation service, to include at a particular time a place in Canada if, at that time, the property being transported has been imported but has not been released and the property is being transported in compliance with the Customs Act or any other Act of Parliament that prohibits, controls or regulates the importation of goods.

18. Sections 8 and 9 of Part VII of Schedule VI zero-rate certain freight transportation services for the shipment of goods from a place outside Canada. For purposes of those provisions, a place outside Canada includes a place in Canada if the goods being transported are in bond and have not been released by the Canada Border Services Agency (CBSA).

19. Subsection 1(1) of Part VII of Schedule VI defines a “shipper” of tangible personal property to mean the person who, in respect of a continuous freight movement or a continuous outbound freight movement, transfers possession of the property being shipped to a carrier at the origin of the freight movement and, for greater certainty, does not include a person who is a carrier of the property to which the freight movement relates.

Types of freight transportation services

20. Based on the definition of freight transportation service as outlined in paragraph 15 of this memorandum, the following services may also be considered to be freight transportation services in certain circumstances.

Reload centres

21. A reload centre is used as a cross dock operation where tangible personal property is transported to a facility by rail or by truck and then transferred onto another conveyance. The property is unloaded and, if not immediately reloaded for further transport, is stored for a short period of time, usually 30 days or less.

22. The services performed in respect of tangible personal property at a reload centre are generally considered to be freight transportation services if the property is not further processed, transformed or altered in any way while at the reload centre, other than to the extent that is reasonably necessary to transport the property.

Shunting services

23. The term “shunting” is used by the freight transportation industry to describe the transfer of trailers from a recipient’s yard to a loading dock. Depending on the arrangement, a shunting company may charge, for services that it renders, either the carrier that brought the trailer into the yard or the recipient of the shipment. A shunting service is generally considered to be a freight transportation service.

Stevedoring

24. “Stevedoring” is the loading and unloading of ships and is generally considered to be a freight transportation service.

25. Persons providing services of stevedoring are generally considered to be carriers.

Towing services

26. The service of towing a vehicle is considered to be a freight transportation service. Roadside services provided by a tow truck operator such as car boosting, winching, and unlocking doors, by themselves, do not qualify as freight transportation services since they do not involve the transportation of tangible personal property. However, if a tow truck operator provides car boosting, or other services prior to towing a vehicle, the car boosting or other services may, depending on the circumstances, be part of, or incidental to, the supply of the towing. Supplies that are part of, or incidental to, a supply of freight transportation service are discussed starting at paragraph 27.

Property or services that may be part of, or incidental to, a freight transportation service

27. As noted in paragraph 15 of this memorandum, “freight transportation service” is defined to include any other property or service that is part of, or incidental to, a freight transportation service when supplied to the recipient of the freight transportation service by the carrier who supplies the freight transportation service, even if there is a separate charge for the other property or service. As a result, a supply of property or a service that is part of or incidental to a supply of a freight transportation service is taxed at the same rate as the freight transportation service.

28. Whether a supply of property or a service is part of, or incidental to, a freight transportation service is a question of fact.

29. See GST/HST Policy Statement P-077R2, Single and Multiple Supplies and GST/HST Policy Statement P-159R1, Meaning of the Phrase “Reasonably Regarded as Incidental” for an explanation on how to determine the existence of single or multiple supplies, and if multiple, whether those supplies are incidental to another supply.

30. Property or services that are part of, or incidental to, a freight transportation service will have the same tax status as the supply of the freight transportation service. The following are examples of property or services that may be part of, or incidental to, a freight transportation service when supplied by the supplier of the freight transportation service to the recipient of the freight transportation service:

• packing services;
• loading and unloading services;
• storage and warehousing services;
• refrigeration services.

Packing services

31. Within the freight transportation industry, a packing service generally refers to a service of packing tangible personal property using suitable materials for safe shipping. It usually includes placing the property in an appropriate container, and labelling the container with the consignee’s shipping information.

32. Based on the definition of freight transportation service, if a supplier of a freight transportation service provides a packing service to its customer, together with the actual freight transportation service, the packing service would be considered part of, or incidental to, the supply of the freight transportation service. In this case, the packing service would be subject to the same rate of tax as the freight transportation service. The supply of a service by a packing company to a moving company, however, of packing tangible personal property for transport is not considered to be a freight transportation service.

Deadheading and empty mile charges

33. “Deadheading” and ”empty mile charges” are terms used by the freight transportation industry to indicate that a truck or rail car is running empty or is carrying a non-revenue-generating load, such as a freight company’s own tangible personal property.

34. A deadheading service supplied on its own is generally not considered to be a freight transportation service. However, if the repositioning of a conveyance is related to a specific freight movement of tangible personal property, the deadheading may be part of, or incidental to, a freight transportation service.

35. When a carrier is paid for empty mile charges for the repositioning of a conveyance, the empty mile charges must relate to a specific freight movement in order to be part of, or incidental to, a freight transportation service. Documents must be kept to show that the charge is part of, or incidental to, a freight transportation service. If the empty mile charges relate only to the repositioning of conveyances, the service would not be considered to be incidental to or part of a freight transportation service.

Pilot car services

36. A pilot car service is the service of using a marker vehicle to pilot a load that a carrier moves that exceeds legislated dimensions for travel on roads and highways. The tax status of the supply of the pilot car service will depend on who is providing the service.

37. A pilot car service is part of, or incidental to, a freight transportation service when it is provided by the carrier and will be taxable at the same rate as the supply of the freight transportation service.

38. If someone other than the carrier provides a pilot car service, or the recipient of the pilot car service is someone other than the recipient of the freight transportation service, the service is not considered to be part of, or incidental to, the freight transportation service.

Driving services

39. A driving service is not, on its own, considered to be a freight transportation service. A driving service may be part of, or incidental to, a freight transportation service depending on who provides the service of a driver.

Place of supply – in or outside Canada

40. The place of supply rules are important with respect to freight transportation services because where a supply is made can determine whether the supply is subject to GST or HST. A supply made in Canada will generally be subject to GST/HST, while a supply made outside Canada will not be subject to GST/HST.

41. Under paragraph 142(1)(g), a supply of a service, including a freight transportation service, is generally made in Canada if the service is, or is to be, performed in whole or in part in Canada.

42. Under paragraph 142(2)(g), a supply of a service, including a freight transportation service, is made outside Canada if the service is, or is to be, performed wholly outside Canada.

Supply by a non-resident

43. Under paragraphs 143(1)(a) and (b), a supply of personal property or a service, including a supply of a freight transportation service, made in Canada by a non-resident shall be deemed to be made outside Canada unless:

• the supply is made in the course of a business carried on in Canada; or
• at the time the supply is made, the person is registered for GST/HST purposes.

Zero-rated supplies of freight transportation services

Interlining

44. Several carriers may participate in the supply of a freight transportation service in the course of a continuous freight movement from the origin of the freight movement to its destination, where only one carrier invoices the shipper or consignee. Where this occurs, the carriers participating in the movement are considered to be interlining. The process of interlining is a common practice within the freight transportation industry and is subject to special treatment for GST/HST purposes.

45. Subsection 1(2) of Part VII of Schedule VI states that where two or more carriers supply freight transportation services in the course of a continuous freight movement and the shipper or consignee of the tangible personal property is, under the contract for carriage for the continuous freight movement, required to pay a particular carrier all or part of the consideration for the continuous freight movement, the particular carrier is deemed to have supplied to the shipper or consignee a freight transportation service having the same destination as the continuous freight movement. The consideration for the deemed supply is deemed to be equal to the consideration paid to the particular carrier, regardless of whether the consideration paid includes an amount paid to the particular carrier as agent of any of the other carriers.

46. The shipper or consignee is deemed to have received a supply of a freight transportation service from the particular carrier and not from any of the other carriers who participated in the continuous freight movement.

47. To the extent that any part of the consideration is paid by one of the carriers (the first carrier) to another carrier (the second carrier), the first carrier is deemed to have received from the second carrier, and the second carrier is deemed to have made to the first carrier and not to the shipper or consignee, a supply of a freight transportation service in relation to the continuous freight movement. As a result, the payment (interline freight settlement) by the first carrier to the second carrier is consideration for the deemed supply of the freight transportation service.

48. The effect of the interline rules under subsection 1(2) is to enable such deemed supplies to be zero-rated under section 11 of Part VII of Schedule VI without first having to determine the actual contractual relationships between carriers.

49. A supply of a freight transportation service made by a carrier of the tangible personal property being transported to a second carrier of the property being transported is zero-rated under section 11 of Part VII of Schedule VI where the service is part of a continuous freight movement and the second carrier is neither the shipper nor the consignee of the property being transported.

50. The deemed supplies between carriers of freight transportation services that are part of a continuous freight movement are zero-rated regardless of whether the interline freight settlements are in respect of domestic or international freight movements.

No interlining when shipper owns the tangible personal property

51. When a carrier hires another carrier to transport its own tangible personal property, the first carrier is the shipper of the property and not a carrier. As such, the interlining rules under subsection 1(2) of Part VII of Schedule VI would not apply, because these rules only apply where there are at least two carriers. As a result, the supply of the freight transportation service would not be zero-rated under section 11 of Part VII of Schedule VI.

Self-employed tow truck operators

52. Towing services provided by a self-employed tow truck operator to a towing company may also be included in the interlining rules. If a towing service is performed by a self-employed tow truck operator who is under contract with a towing company to provide towing services, the supply by the self‑employed tow truck operator would be zero‑rated under section 11 of Part VII of Schedule VI.

Roadside services

53. Roadside services, such as car boosting, winching, and unlocking doors, provided by a tow truck operator are not freight transportation services unless the service is incidental to, or part of, a supply of a freight transportation service. Consequently, a roadside service would not be considered to be interlining if the service is not incidental to, or part of, a towing service provided by a tow truck operator to a towing company.

Gravel pit owners and dump truck operators

54. It is common for a contractor who has been engaged to build a road to own a gravel pit and to supply the gravel needed to build the road from its pit. Given the volume of the gravel required to build the road, the contractor often subcontracts with dump truck operators to transport the gravel to the road construction site.

55. The interlining rules do not apply in this situation. In these circumstances, the contractor is considered to be the shipper of the goods and not the carrier. For the interlining rules to apply there must be at least two carriers. In this case, the dump truck operator is the only carrier.

Chargebacks

56. Interlining may also involve supplies, other than freight transportation services, between carriers. Often when an independent truck owner (owner-operator) is subcontracted by a carrier to provide interlining freight transportation services to the carrier, the carrier will initially pay some of the costs related to supplies of fuel, truck repairs, maintenance and permits incurred by the owner-operator to transport the tangible personal property, with the understanding that the carrier will recover the costs from the owner-operator at a later date. Unless the carrier incurred the costs as agent of the owner-operator, the recovered amounts are consideration for supplies made by the carrier to the owner-operator (see GST/HST Policy Statement P-182R, Agency for more information on agents and agency). The consideration for such supplies is referred to as a chargeback.

57. The chargeback may be in respect of a supply related to a freight transportation service in that it relates to inputs required for the supply of the freight transportation service, but it is not consideration for the freight transportation service itself. As a result, the interlining rules do not apply to supplies that give rise to a chargeback.

Couriers

58. The rules respecting interlining may also apply to courier services.

59. A courier may be contracted by a freight company to pick up or deliver tangible personal property. If the freight transportation service supplied by the courier is part of a continuous freight movement, it will be zero-rated under section 11 of Part VII of Schedule VI.

60. A person who is self-employed and under contract with a courier company may be involved in interlining if the courier company contracts with and invoices the shipper or consignee.

61. When a courier company contracts with a person to deliver tangible personal property and issues an invoice to its customer, the courier company is responsible for charging and collecting the GST/HST. If the delivery service is performed by a self‑employed courier who is under contract with the courier company to provide delivery services, the delivery service by the self-employed courier is zero-rated under section 11 of Part VII of Schedule VI.

International freight transportation services

62. In addition to interlining, a supply of a freight transportation service may be zero-rated under other provisions of Part VII of Schedule VI. Generally, a freight transportation service will be zero-rated where the transportation of the tangible personal property is from:

• a place in Canada to a place outside Canada where the freight charge is $5 or more;
• a place outside Canada to a place in Canada; or
• a place outside Canada to another place outside Canada, even if the property passes through Canada.

Outbound freight movement

From a place in Canada to a place outside Canada

63. A supply of a freight transportation service in respect of tangible personal property from a place in Canada to a place outside Canada is zero-rated under section 6 of Part VII of Schedule VI where the value of the consideration for the supply is $5 or more.

Mail to an address outside Canada

64. The definition of “freight transportation service” includes a service of delivering mail. As a result, a supply of a service of delivering mail to an address outside Canada is zero-rated under section 6 of Part VII of Schedule VI if the value of the consideration for the supply is $5 or more. As well, a supply of a postage stamp or a postage-paid card, package, or similar item (other than an item bearing “business reply” indicia) will be zero-rated if the consideration is $5 or more and, at the time of the supply, the postage is affixed to the mail and possession of the mail is directly transferred to an official of Canada Post Corporation (Canada Post) or an authorized agent of Canada Post, for the purpose of delivering it to a place outside Canada.

Part of outbound freight movement within Canada

65. A supply made by a carrier of a freight transportation service in respect of tangible personal property from a place in Canada to another place in Canada is zero-rated under section 7 of Part VII of Schedule VI where:

• the shipper provides the carrier with a declaration in prescribed form (see the Appendix) that the property is being shipped for export and that the carrier’s freight transportation service is part of a continuous outbound freight movement in respect of the property;
• the property is exported and the freight transportation service is part of a continuous outbound freight movement in respect of the property; and
• the value of consideration for the supply is $5 or more.

Shipper’s declaration

66. A shipper’s declaration states that tangible personal property is being shipped for export and the carrier’s supply of a freight transportation service is part of a continuous outbound freight movement of the property. The declaration may be on the bill of lading given to the original carrier, or on a separate document given to the carrier. Refer to the Appendix for an example of a shipper’s declaration.

Carrier is not required to collect tax

67. Under subsection 221(3), a carrier that is provided with a shipper’s declaration for purposes of section 7 of Part VII of Schedule VI is not required to collect tax in respect of its supply of a freight transportation service as long as, at or before the time the tax in respect of the supply becomes payable, the carrier did not know, and could not reasonably be expected to know, that:

• the tangible personal property was not being shipped for export;
• the transportation was not part of a continuous freight movement; and
• there was, or was to be, any diversion of the property to a final destination in Canada.

Inbound freight movement

From outside Canada to a place in Canada

68. A supply of a freight transportation service in respect of tangible personal property from a place outside Canada to a place in Canada is zero-rated under section 8 of Part VII of Schedule VI. A “place outside Canada” includes a place in Canada if, at the time of shipment, the goods being transported are held in-bond and have not been released by the CBSA.

From a place outside Canada to a place outside Canada

69. A supply of a freight transportation service in respect of tangible personal property from a place outside Canada to another place outside Canada is zero-rated under section 9 of Part VII of Schedule VI. Pursuant to the definition of “place outside Canada” under subsection 1(1) of Part VII of Schedule VI, zero-rating under section 9 includes fully in-bond freight transportation services as well as a freight movement that does not originate or terminate in Canada but travels through Canada to a destination outside Canada (in‑transit moves through Canada).

Part of inbound freight movement within Canada

70. A supply of a freight transportation service from a place in Canada to another place in Canada is zero-rated under section 10 of Part VII of Schedule VI if:

• it is part of a continuous freight movement from an origin outside Canada to a destination in Canada; and
• the supplier of the service maintains documentary evidence satisfactory to the Minister that the service is part of a continuous freight movement from an origin outside Canada to a destination in Canada as specified by the shipper.

71. Satisfactory evidence includes a copy of an air waybill showing the origin and destination of a shipment.

Supplies to international carriers

72. A supply of property or a service, such as fuel or maintenance and repair services, to a non-resident carrier who carries on a business of transporting property to or from Canada or between places outside Canada by ship, aircraft or railway and who is not registered for the GST/HST at the time the supply is made may be zero-rated under section 2 of Part V of Schedule VI if the supply is for consumption, use, or supply in the course of so transporting property.

73. For more information see GST/HST Memorandum 4-5-2, Exports – Tangible Personal Property and GST/HST Memorandum 4-5-3, Export - Services and Intellectual Property.

Place of supply – in a participating or non-participating province

74. If it is determined that a supply of a freight transportation service is made in Canada and is not zero-rated, it is necessary to determine the province where the supply of the service is made in order to determine whether the supply is subject to the GST or the HST at the applicable rate.

75. Section 144.1 deems a supply to be made in a province if it is made in Canada and is, under the place of supply rules set out in Schedule IX, made in the province. A supply made in Canada that is not made in any participating province is deemed to be made in a non-participating province.

76. Under section 5 of Part VI of Schedule IX, subject to Part VII (special rules for postage), a supply of a freight transportation service is considered to be made in a province if the destination of the service is in the province. A taxable supply (other than a zero-rated supply) of a domestic freight transportation service is subject to the GST if it is made in a non-participating province or is subject to the HST at the applicable harmonized rate if the supply is made in a participating province.

77. For more information on the place of supply rules, see GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province.

Separate supplies of freight services in Canada

78. Where a supply of a freight transportation service has destinations in more than one province, the provision of the service of transporting tangible personal property destined for each province is deemed under section 136.3 to be a separate supply made for separate consideration equal to the portion of the total consideration for the supply that is reasonably attributable to the transportation of the property to each of those destinations.

79. For more information on the place of supply rules, see GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province.

Postage and mail delivery services

80. The definition of “freight transportation service” includes the service of delivering mail.

Postage stamp

81. Section 1 of Part VII of Schedule IX defines “postage stamp” to mean a stamp authorized by Canada Post for use as evidence of the payment of postage, but does not include a postage meter impression, a permit imprint, or any “business reply” indicia or item bearing those indicia.

Supply of postage stamp, postage-paid item, and mail delivery service

82. Under section 2 of Part VII of Schedule IX, a supply of a postage stamp or a postage‑paid card, package, or similar item authorized by Canada Post (other than an item bearing a “business reply” indicia) is considered to be made in a province if the supplier delivers the stamp or item in that province to the recipient of the supply, and where the stamp or item is used as evidence of the payment of postage for a mail delivery service, the supply of the service is considered to be made in that province, unless

• the supply of the mail delivery service is made by way of a bill of lading; or
• the consideration for the supply of the service is $5 or more and the address to which the mail is sent is not in a participating province.

83. Supplies of mail delivery services that do not meet the conditions of paragraph 82 are subject to the general place of supply rules for freight transportation services as set out in paragraph 76 of this memorandum. As a result, a supply of a mail delivery service made by way of a bill of lading is deemed to be made in a province if the destination of the service is in the province. In addition, if the consideration for a supply of a mail delivery service is $5 or more and the address to which the mail is sent is in a non-participating province, the supply is deemed to be made in that province.

84. If a supply of a mail delivery service is made to an address outside Canada, the supply of the postage stamp or postage-paid card, package or similar item authorized by Canada Post (other than an item bearing “business reply” indicia), as well as the mail delivery service, may in certain circumstances be zero-rated. Refer to paragraph 64 of this memorandum for more information.

Postage meter impression

85. Under section 3 of Part VII of Schedule IX, a supply of a mail delivery service made by Canada Post for which payment is evidenced by a postage meter impression is made in a province if the ordinary location of the meter, at the time the recipient of the supply pays an amount to Canada Post for the postage, is in the province (unless the supply is made pursuant to a bill of lading).

Ordinary location

86. The ordinary location of a postage meter at a particular time is deemed under section 4 of Part I of Schedule IX to be the location the supplier and the recipient mutually agree is the ordinary location of the meter at that time and this location may change from time to time.

Permit imprint

87. Section 1 of Part VII of Schedule IX defines a “permit imprint” to mean an indicia the use of which as evidence of the payment of postage exclusively by a person authorized under an agreement between Canada Post and the person, but does not include a postage meter impression or any “business reply” indicia or item bearing that indicia.

Payment of postage evidenced by a permit imprint

88. Under section 4 of Part VII of Schedule IX, where payment of postage for a mail delivery service supplied by Canada Post is evidenced by a permit imprint (other than a supply made pursuant to a bill of lading), the supply of the service is made in the province in which the recipient of the supply deposits the mail with Canada Post in accordance with an agreement between them authorizing the use of the permit imprint.

Business reply indicia

89. A supply of a service of delivering an item bearing “business reply” indicia is subject to the general place of supply rules for freight transportation services set out in paragraph 76 of this memorandum. Accordingly, a supply of mail delivering an item bearing “business reply” indicia is made in a province if the destination of the mail delivery service is in the province.

90. For more information on the place of supply rules see GST/HST Technical Information Bulletin B‑103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province.

Special issues

Freight forwarders’ services

91. Freight forwarders are generally engaged in assisting shippers with the preparation and booking of a freight transportation service for tangible personal property to a destination specified by the shipper or consignee of the property, usually in the context of international trade.

92. Freight forwarders may consolidate tangible personal property from various shippers for purposes of a freight movement to be transported by the same carrier. For example, a company may hire a freight forwarder to find shippers needing to transport small amounts of cargo to fill a partially-empty conveyance.

93. A freight forwarder may be a carrier or may act as an agent on behalf of a shipper or a consignee. It is a question of fact whether a freight forwarder is operating as a carrier, or is arranging for freight transportation services as an agent on behalf of a shipper or a consignee.

Freight forwarder as carrier

94. If the freight forwarder assumes liability for the transportation of tangible personal property and presents itself as a carrier, the freight forwarder is considered to be a carrier and its service with respect to that transportation is considered to be a freight transportation service that is subject to the same GST/HST rules as a carrier who performs a freight transportation service of actually transporting the property.

Freight forwarder as agent

95. A freight forwarder is not a carrier when it acts as an agent on behalf of a principal who is either a shipper or carrier. In this case, the freight forwarder does not assume any liability for the transportation of the tangible personal property and is therefore not considered to be supplying a freight transportation service.

96. A freight forwarder’s supply of a service of acting as an agent may be zero-rated in certain circumstances.

Supplies by agents to non-residents

97. A supply of a service of acting as an agent for a non-resident person who is not registered at the time the supply is made, to the extent that the service is in respect of a supply to that person of a freight transportation service that is included in sections 6, 7, 8, 9 or 10 of Part VII of Schedule VI is zero‑rated under section 12 of Part VII of Schedule VI. Sections 6 through 10 of Part VII of Schedule VI zero-rate freight transportation services that are, or form part of, a continuous outbound or inbound freight movement. Refer to paragraphs 63 to 71 of this memorandum for more information.

98. Whether a person is considered to be acting as agent on behalf of a non-resident is a question of fact. The onus is on the parties involved in any transaction to determine whether an agency relationship exists.

99. Additional information regarding agency relationships is provided in GST/HST Policy Statement P-182R, Agency.

Sufferance warehouses

100. Sufferance warehouses are privately owned and operated facilities licensed by the CBSA and are established for the landing, storage, safekeeping, transfer, examination, delivery and forwarding of imported goods before they are released by the CBSA.

101. A supply made by a sufferance warehouse operator licensed under paragraph 24(1)(a) of the Customs Act is zero-rated under section 13 of Part VII of Schedule VI when the purpose of the service is to enable the examination of the goods before release. Services that could be zero-rated include container handling services such as the physical movement, opening, unpacking, repacking and closing of containers within the confines of a sufferance warehouse to enable examination of the goods before their release.

102. The zero-rating provision under section 13 of Part VII of Schedule VI does not apply to supplies of office rental space, bay rental fees, or services related to the preparation of entry documents (other than re‑manifesting fees incidental to the handling and storage of goods).

103. Additional information on sufferance warehouses is available in Customs Memorandum D4-1-4, Customs Sufferance Warehouses.

Loss or damage

104. Occasionally, a carrier may be required to replace goods or otherwise compensate a shipper if the goods are lost or damaged in transit.

105. A settlement made by a carrier to the recipient of the supply of freight transportation services for goods lost or damaged in transit does not meet the conditions of subsection 182(1) of the Act. Generally, a settlement in which a carrier compensates a shipper with a payment for goods lost or damaged is not consideration for a supply and is not subject to the GST/HST. For more information on damage payments, see GST/HST Policy Statement P-218R, Tax Status of Damage Payments, Whether or Not Within Section 182 of the Excise Tax Act.

Rolling stock penalties and demurrage

106. Demurrage fees are amounts that a shipper pays a carrier for the detention of a ship, freight car, or other cargo conveyance during loading or unloading beyond the scheduled time of departure.

107. Under section 162.1, an amount that is paid as or on account of demurrage, or any penalties paid by a railway corporation to another railway corporation for delay in returning railway rolling stock are deemed not to be consideration for a supply.

108. Subsection 26(1) of the New Harmonized Value-Added Tax System Regulations states that a supply of railway rolling stock otherwise than by way of sale is made in a particular province if the supplier delivers the rolling stock or makes it available to the recipient of the supply in that province.

109. For more information on rolling stock, see GST/HST Policy Statement P-217, Meaning of the Term “Rolling Stock”.

Further information

Appendix

The following declaration may appear on the carrier’s bill of lading or the shipper may prepare the declaration as a separate document to be provided to the carrier.